Gilbert Service Businesses Face Major Tax Changes: Your Complete Guide to Arizona’s 2024 Transaction Privilege Tax Updates

If you operate a service business in Gilbert, Arizona, significant Transaction Privilege Tax (TPT) changes that took effect in 2024 and early 2025 could dramatically impact your tax obligations. From rate increases to new compliance requirements, these updates require immediate attention to avoid costly penalties and ensure your business remains compliant with state and local tax laws.

Key Gilbert TPT Rate Changes for 2025

On October 22, 2024, the Common Council of the Town of Gilbert passed Ordinance 2918, amending the Town Tax Code to increase the general transaction tax rate from 1.5% to 2.0%. This represents a significant 33% increase in the local tax rate that affects most service businesses operating within Gilbert’s boundaries.

As of February 2025, the total sales tax rate in Gilbert, AZ is 8.3%. This includes the Arizona state tax of 5.6%, Maricopa County tax of 0.7%, and Gilbert city tax of 2.0%. Service businesses must now calculate their TPT obligations using this updated combined rate structure.

Critical License Renewal Requirements

Arizona service businesses faced mandatory TPT license renewals with strict deadlines. Businesses licensed with the Arizona Department of Revenue (ADOR) were required to renew their TPT license by January 1, 2025. Penalties and/or late fees will apply to renewals received after January 31, 2025.

For businesses that missed the initial deadline, if a business does not pay the renewal fee timely, they will receive a bill from ADOR for the unpaid renewal fees plus renewal penalties (The penalty is 50% of the city renewal fee). This creates substantial financial consequences for non-compliance.

Electronic Filing and Payment Mandates

Arizona has implemented stricter electronic filing requirements that affect many Gilbert service businesses. Transaction Privilege Tax – Any taxpayer with $500 prior tax year liability. Taxpayers required to file an electronic return will be subject to a penalty of 5% of the tax amount of payment due for filing a paper return. The minimum penalty is $25, including filings with zero liability.

Service businesses must ensure they’re using the correct electronic systems and payment methods to avoid these penalties. To file and pay online, a business must be registered on AZTaxes.gov and use ACH debit, e-check, or credit card as a payment method to comply with electronic funds transfer (EFT) payment requirements.

Residential Rental Tax Elimination Impact

One positive change for certain service providers involves the elimination of residential rental taxes. The elimination of transaction privilege tax (TPT) applicable to the rental of real estate for residential purposes (residential rental) is effective as of January 1, 2025. An amendment to A.R.S. § 42-6004 (H) exempts residential rental TPT from being levied.

This change affects service businesses that manage residential properties or provide services to residential rental operations, as they no longer need to collect and remit TPT on long-term residential rentals of 30 days or more.

New Compliance Requirements for Service Businesses

Gilbert service businesses must pay careful attention to proper deduction codes and tax rate applications. Ensure the deduction code being reported is applicable to the business classification; and the totals entered in the transaction detail tables equal the totals entered into the corresponding Schedule A. Deductions reported with an incorrect or missing deduction code will be disallowed and penalties and interest may apply.

The region code used to report Gilbert activity on your TPT return is GB, and all rates are 2.0% unless otherwise indicated. Service businesses must ensure they’re using the correct regional codes when filing their returns to avoid processing delays and penalties.

Professional Guidance is Essential

Given the complexity of these changes and the severe penalties for non-compliance, many Gilbert service businesses are turning to professional tax resolution services for guidance. Working with an experienced accountant gilbert can help ensure your business navigates these changes successfully while maximizing available deductions and credits.

Remote Seller Considerations

Service businesses with remote operations must also consider new thresholds. Remote sellers and marketplace facilitators without a physical presence in Arizona must renew their TPT licenses if they had more than $100,000 in gross sales to Arizona customers in the 2024 calendar year. This affects many modern service businesses operating across state lines.

Action Steps for Gilbert Service Businesses

To ensure compliance with these TPT updates, Gilbert service businesses should immediately:

• Verify their TPT license renewal status and pay any outstanding fees
• Update their tax calculation systems to reflect the new 2.0% Gilbert rate
• Ensure electronic filing capabilities are properly configured
• Review deduction codes and business classifications for accuracy
• Update accounting systems to use the correct regional codes
• Consult with qualified tax professionals to navigate complex compliance requirements

The Arizona Department of Revenue continues to provide resources and updates through their monthly TPT newsletters and rate tables. However, the complexity of these changes and the significant penalties for errors make professional guidance invaluable for most service businesses operating in Gilbert.

By staying informed about these TPT updates and taking proactive compliance measures, Gilbert service businesses can avoid costly penalties while ensuring they meet all state and local tax obligations in this evolving regulatory environment.